Iran's policy is a product of the games in Germany during Olympics in the 1930s. The inferior Jessie Owens trounced the superior Germans . Can you imagine the embarrassment to the Iranians if this happened to them.? They are just flat out fearful of looking bad.
Monitor: Clashes near Damascus despite truce there, five killed in Aleppo (Reuters)
from the article: World Jewish Congress: Ban Iran from Olympics over anti-Israel boycott